Too tough to pass

2011-03-02 17:41

Helena Wasserman

Johannesburg - New compulsory exams in the financial services industry may have a huge impact on the number of intermediaries and sales forces of large institutions.

The exams, which are supposed to test knowledge in the industry and were outlined in legislation a number of years ago, were finally introduced in November last year. The Level 1 (RE 1) exam, which is compulsory for anyone who provides financial advice and intermediary services, tests regulatory compliance and needs to be passed by December this year. Failure to do so will disqualify the person from the industry.

The Level 2 (RE2) exam focuses on specific financial products and has to be passed by December 2013.

While acknowledging the need to "professionalise" the industry and address the lack of regulatory knowledge, many financial advisers have complained to Fin24 about the exams.

In one office, only a fifth of those who took the exam made the grade. A mark of 65% or 66% (depending on the exam) has to be achieved to get a "pass".

"A surgeon that operates on me only had to get 50%," a financial planner grumbled.

Gregg Sneddon, a financial adviser of planning firm The Financial Coach, expects the exams to “decimate” the sales forces of large financial institutions – as well as the number of financial advisers in the country.

About 150 000 people will have to pass the exams, but Sneddon expects only a small number of those to succeed. Only about 2% of those who will take the exam are certified financial planners, the top professional accreditation requiring educational, examination, experience and ethics minimum standards.

“Our experience is that those who wrote the exam and achieved the minimum of 65% were by far the minority,” says Jaco Coetzee, head managers of Sanlam Financial Advisers. Those who took the exams were well-qualified – CFPs and managers with graduate degrees. He says the problem is particularly the misleading way the questions are put.

“If the exam papers are not drastically reviewed and the minimum marks to pass (65%) are not reconsidered, the current RE exams could potentially end the careers of 50% of intermediaries.”

A senior representative from a large insurer, who wanted to remain anonymous, also says the way the exam questions are put is very difficult. "Some of the (multiple choice) questions contain a very small tweak to the legislation, which may be difficult to pick up.”

Elna Rudman, a Pretoria-based insurance broker, says the exams are necessary, particularly for those who are still not aware of the implications of the Financial Advisory and Intermediary Services (FAIS) Act, which was implemented in 2004.

But she feels the deadlines on the exams are too tight. The RE1 exams were supposed to be launched early in 2010, but the first exams were only available in November.

Sneddon thinks the deadline will be extended. The Financial Services Board did not respond to a request for comment.

Costs and other gripes

The cost – R900 an exam - is also daunting for many advisers who are already battling to survive. Advisers who have to take exams repeatedly and those who are accredited to sell a number of different products (and will have to take different RE2 exams) will have to fork out thousands – at a time when they are already struggling to survive in a challenging economic climate.

Sneddon has calculated "just on a point of interest" that the FSB will take in more than R2.4m, and the four different exam bodies more than R100m just for the RE1 exam.

Another big gripe is that the exam is only available in English.

"Especially the older guys on the platteland don’t know the English financial terms, which is a huge drawback," an adviser says. He complains that the wording of the multiple choice questions is difficult."The questions are worded in the negative – as if they want to catch you out."

Some of the advisers also complain that the exams are not based on the study material compiled by the Insurance Sector Education and Training Authority (Inseta). The accredited examination authorities - Moonstone Information Refinery, the Financial Planning Institute, Institute of Bankers (Leselo) and the South African Institute of Financial Markets – has each had to compile different exams.

"It is like writing a Unisa exam, while preparing with study material from the University of Pretoria," an adviser said.

Moonstone director Hjalmar Bekker says it will be difficult for advisers who don't study the source legislation, specifically the Board Notice 105 of 2008 which determines the criteria for financial services providers, to pass the exam. Examination bodies are not allowed to comment on the study material or training service providers to prevent a possible conflict of interest.

He acknowledges that there have been complaints from the industry about problems for those who don't have English as a mother tongue, but says that the legislation governing financial services is exclusively in English.

To translate the exams in all 11 languages will be expensive and will make the exams pricier for intermediaries.

Bekker says that those who do not pass the exam will be forced to change careers.

"But the exams will only be a threat to the industry if they are not approached in the right way and not tackled with enough energy."

- Fin24

Comments

jono
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2011-03-02 18:29

Ag shame,,,, if you cant speak english, and if you cant pass an exam on financial services, you should not provide the service

johan
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2011-03-03 07:04

How can a person that is suppose to advise me on financial planning not afford a R1000? Am I missing something?

lamha vukawe
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2011-12-12 11:42

Exactly what I thought, if they want to advise me on where to put my nest egg but dont have R1K then really I am going elsewhere for advice!

100000454717327
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2011-12-13 13:31

Okay, Consider ALL the other costs of running a compliant business practive, Salaries, bonds, etc etc... Now do you see how much R 1000.00 actually is. Don't be ignorant johan

Why doesn't this regulation apply to Lloyd's who conduct business in South Africa? Seems we are penalising the local industry with the possible loss of jobs and premium to the benefit of the UK. Same applies to Conflict of Interest. The Regulators have lost the plot.

hehe
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2011-03-03 08:41

Never come accross a financial planner from any of the large institutions capable to give advice for buying a packet of chips

Theo
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2011-03-03 08:44

"A surgeon that operates on me only had to get 50%," a financial planner grumbled." The surgeon had to study some 10 years to get where he is, how many did you study grumpy financial planner? i say go ahead, the industry needs to be more professional and the cowboys need to be removed from the streets. i wonder how many financial planners really care about their clients and not about their pockets?

koos
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2011-03-03 09:20

@jono - why not use your full name, otherwise do not comment if you dont understand the situation

Quinten Knox
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2011-03-03 09:22

Are all the Financial Services Board's staff who police us and our industry (Enforcers, Managers:Compliance, Specialist Analysts: Compliance, Senior Analysts:Compliance, Analysts: Compliance, Managers:Supervision, Analysts:Supervision,etc etc etc)going to write and pass the same exams as us before the cut-off date? It would be laughable if this is not the case. It would be like a judge without any qualifications presiding over a case and the advocates and attorneys do have qualifications.

amajuba
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2011-03-03 09:55

If one does not have full knowledge of specialist field one can NOT give Advise to any person. It will result in the ruin of client and company. so ask your advisor if they have passed the examand have the certifacte. Had a sad experience with an official who could understand simple written word! could this be BEEE gone wrong.

Kurt
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2011-03-03 10:01

@Jono, I suppose you have written the exam and passed?? Otherwise ..keep quiet.
My perception is not the quality of the exam papers, but the lack of appropriate preparation being the major culprit. Most financial advisers no longer used to studying or have never foramlle studied. Many I have spoken to are trying to 'crash course' the various available materials due to a variety of reasons, but with the subsequent disappointing results. My advice is rather postpone writing the exam and set proper time apart for mastering the material.

Prue
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2011-03-03 10:02

So...the purpose of the exam is to up skill people and they complain that it's not done in the way they want? Right...

Burnt by "Advisors"
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2011-03-03 10:04

This is great news! We need to cull all the "financial advisors" who are just salesmen that know little about what is best for their clients.

100000454717327
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2011-12-13 13:35

Don't judge ALL advisors.I will happily prove you wrong and invite you to my business at any time, I agree, there is bad advisors out there, such as any industry.

stuart
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2011-03-03 10:12

No-one in the industry should object to having to pass product examinations. But the RE1 exam is on knowledge of the legislation and not on financial products. We have to employ a compliance officer who min turn is checked on by the FSB so why must advisors know the legislation when we have people to ensure we comply? Does any other indusrty - other than lawyers - have to pass an exam on relevant legislation? A wate of time. Hoc can consumers benefit from this? It ought to be dropped before any mote money is wasted.

mikei
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2011-03-03 10:17

People who fail always blame something other than themselves. Compulsory examinations should become applicable to every profession from tree feller to handyman. There are too many people conning the public with promises of expertise that they charge for but don't have.

carl
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2011-03-03 10:23

I wonder if Jono would pass an afrikaans paper. It is a pity that the 11 languages are always thrown in as an excuse. Fact of the matter is that a very large number(50%?) of those who deliver the service, are afrikaans speakers to approximately the same percentage of afrikaans speaking clients. Why only english papers since 1994? There is no reason why translations to all the other languages can't be made as well. It is not as costly as people want you to believe. Shake up and rather give the true reasons - you are not fooling me.

DG
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2011-03-03 10:32

I do not understand why those of us who are CFps and already passed similar exams need to rewrite! Surely this should be taken into account.

mike
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2011-03-03 10:34

"He says the problem is particularly the misleading way the questions are put". If you look at some of the school text books, and the layout of the learner driver test, I am not surprised the Financial services exam is a botch. Just trying to work out what the person is after or trying to explain, is just so badly set out. I know this because I sometimes listen to my wife do homework with my kids (she has an honours degree in clinical psychology in case you think she is doff). She wants to pull her hair out when she sees how badly questions are phrased.

zharina
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2011-03-03 10:44

approximately 50% of people will have their finacial career come to a very upsetting halt;wouldnt this be adding to the already devastating unemployment figure plaguing our country? is this realistic?what would be left for these people to do but to revert to some form of crime to make a living?

Hanlie
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2011-03-03 10:47

jono, I take it that you are a financial service provider and have already written the exams and passed, otherwise .... keep quiet and keep to things you maybe know something about, because in this case I think you are not suitable to give ANY comment

Alasdair Farquharson
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2011-03-03 11:27

Ignoring Jono's inane comment below I can advise that I took and passed the RE1 and RE5 exams in February.
I have complained to one of the examining bodies, Moonstone, that the exams and the relevant Inseta learning material are unrelated to each other and the questions are overly obscure and veiled. In fact some of the questions are actually wrong! Needless to say there has been no response from any of the role players to whom, I am assured, my complaints have been passed.
Generally the point of the exams, especially the RE5 for Representitive should be to ensure that they have a working knowledge of the FAIS Act and related Acts and their roles and responsibilities within that. Unfortunately the way the exams are set up has created a scenario where the examiners has tried to show how clever they are instead of finding out if the student has the required knowledge.
I agree with the comment that the current pass mark is too high and that normal reps in intermediary offices will battle to pass. The question arises as to whether this was the intention of the FSB all along!!

Tharir Square
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2011-03-03 11:37

Maybe the whole industry should consider pulling an Egypt on this one forcing a total re-look on this matter

Wendy Aylward
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2011-03-03 11:46

I agree. The exams should test our knowledge. We have all gone through a very difficult 7 years. First studying, writing procedures, registers and registers, conflict of interest, compliance reports, financial statements etc etc. Then we went through a recession with many lapses but we stayed positive and did what we had to do. It will be very nice though if we could start focusing on our practices. If the exams are going to be that difficult I cannot see new advisors entering the market. What is going to happen when all the current advisors/brokers retire?

Steven
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2011-03-03 12:21

Why is there not a qualification to be the President of South Africa or are financial planners more important than the President?

Thomas
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2011-03-03 13:28

I agree, if the exams are badly written a revision of the test questions should be looked into. However if the FSB wants to establish a high level of quality by setting difficult papers. So that people actually have to study. Then well done to the FSB.

James
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2011-03-03 14:06

Maybe the guys at Fin24 will actually publish a comment of mine for a change. I agree completely with what has been said. I feel that the exams have been set out specifically to create uncertainty.(trickery) A Very negative approach. Ultimately Financial Planners need to have a clear understanding of both the FAIS and FICA legislation. WHY DO WE NEED TO BE TESTED IN SUCH A WAY THAT WE ARE FORCED TO PRATICALLY COMMIT TO MEMORY 2 ENITRE ACTS! Doing my CFP we are tested on the principals with reference to the Act. I am not happy about this at all. I have to question what the FPI actually does for its members. A dog without Teeth dare I say?

dee
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2011-03-03 14:11

Here I am with Stephen. Many of our ministers are not fully qualified for the portfolio of which they are in charge - and they make decisions for all of us. I agree people should be qualified to advise on any subject and I would ensure that my finaincial adviser had a good qualification - I dont have the same choices on my country's advisors. This sounds like another money making racket to me.

ULB
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2011-03-03 14:13

This is great! WHAT IS THE COMPLAINT? It will finally get rid of all the No-good (and, well, lets face it, 90% "BEE" intermediaries!!!) and make the industry only for guys with brains and for qualified guys, mainly with degrees. There is NO "BEE"Intermdieary working in the industry with a degree anyway! (why should they, the income with corporate salaries is MUCH better). "BEE" Intermediaries (and we know who they are) are in 90% of the cases ill-qualified anyway and must leave the indusry! Gr8.

Johan
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2011-03-03 14:13

So, we have to write an exam to save our jobs.This in a country that needs 5 000 000 jobs.This is outrageous,and must be the most over regulated industry in South Africa.

Norman Cochrane
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2011-03-03 14:26

I accidentally came across this blog very intertesting. Here in the UK we are already part way through our second bite of this cherry! current advisers had to pass a level 3 set of exams before they were allowed to advise clients, now they are having to upgrade to a level 4, which will be the entry qualification by 31/12/12.
It will deliniate those that give advice and those that are just selling without advice. like "which tin of beans do you want? we have those with a red, blue or green label.
those that make the effort to get the qualification will get a bigger slice of the clients with more money, and there by increase their earnings. for those clients with little or no money or can't aford the advice (as we will be charging fees too!) will have to research free information then make an informed choice. for good or for bad.
As a training business we help the advisers pass these exams, in class rooms or by e-learning, and this leads me to believe that of those that make the effort, and pass the hurdles, they do really make a difference to the quality ofthe advice they give.
So stop waiting and get on with it. Good luck.

Rayman
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2011-03-03 14:41

I wrote both the exams a week ago, passed the KI but failed the Rep exam, got 64% and they are not prepared to reconsider, not worth paying the R250, as the chances of the machine marking the paper currently is very slim.

Terence
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2011-03-03 15:50

I honestly think that these exams will get rid of the hit and run salesman and leave behind true professional financial planners. However do the nature of the exams and the fact that possibly 50% of planners will leave the industry are you the general public ready to start paying us fees instead of commission? Are you ready to think of us as professionals like Charted Accounts, Doctors etc?

100000454717327
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2011-12-13 13:25

Those who complain about commissions, are they prepared to pay fees?? I dont think so... But, they will spend a few thousand Rand at a casino, smokes and booze

bheki.dingiswayo
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2011-12-14 14:22

Obviously the business will increase and so is the commission. There will be less consultant.

Dave
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2011-03-04 07:43

This is great way to get rid of the riff raff in the industry. If you cant pass these exams, you should not be giving advice!

Scroogie
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2011-03-04 08:23

Well, well, well! Most of the comments indicate to me that the brokers/advisers/planners are merely financial salesmen. Ignorance of the law can no longer be pleaded. However, I would like to see a tough exam on due diligence for products sold since this could block selling investments in dubious schemes, between 40k and 70k in one syndication.

@KURT and koos
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2011-03-04 11:51

koos - u dont use ur full name so why shold i?
kurt - ive passed a masters in accounting, after 8 years of studies...
jono

AT HANLIE and alisda
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2011-03-04 11:56

see my comment on kurts comment.
i am qualified in my field due to 7 years of studies.
write the exams, pass and move on. If you dont pass, how can you expect to provide advice?
alisdair - explain why you consider the above thinking to be inane? 2+2=4 right? eesh